Banxico Eyes Further Rate Cuts Amid Growth Slump and Trade Risks

Victoria Rodríguez Ceja, Governor of Mexico’s central bank, signaled that Banxico will extend its cycle of interest-rate cuts through 2025, so long as headline inflation remains on its current downward path, according to an official statement.

She noted that steady disinflation allows policy easing without risking price stability. Banxico cut its benchmark rate to 9.5% on February 10 and to 9.0% on March 27, marking seven reductions since March 2024.

The current rate now sits at its lowest level since September 2022. Economic data show GDP grew only 0.2% in the first quarter, after a 0.6% contraction in late 2024.

Manufacturing barely expanded and services slowed, while the energy sector contracted. The central bank now forecasts 2025 growth at 0.6%, in line with its latest quarterly report. Private surveys remain near 1.0%, down from 1.2% in late 2024.

Annual inflation eased to 3.7% in early March, within the bank’s 2–4% tolerance band. Therefore, policy makers feel comfortable trimming rates further if the peso remains stable.

Mexico faces trade uncertainty as U.S. tariff threats threaten key exports. Consequently, businesses report slowing orders and supply chains face rising costs. Additionally, weak private investment and household spending damp growth.

Remittances and export demand have lost momentum, weighing on foreign currency inflows. Meanwhile, employment growth stays below its long-term average, limiting consumer confidence.

Banxico must balance supporting growth and keeping prices stable. The board plans to meet again on May 15 and left the door open for another half-point cut before year end.

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